The Nevada Democrat told reporters yesterday that he wants
to ensure that the requirement’s repeal would apply only to
government contractors that are current on their tax
obligations.

The comments were made less than a week after the House
approved the repeal legislation in a 405-16 vote. The prospect
of changes to that measure drew a frustrated response from House
Republicans and business groups.

“Both the three percent provision and the pay-for were
specifically supported by the White House,” Michael Steel, a
spokesman for House Speaker John Boehner, said in an e-mailed
statement yesterday. “It’s tough to understand why the Senate
Democratic leadership doesn’t just pass the House-passed bill.”

Senate Minority Leader Mitch McConnell, a Kentucky
Republican, also called for Senate passage of the House bill.

“I would hope that the Senate majority would be willing to
take that up and pass it and send it down to the president for
his signature in the near future,” he told reporters.

‘Delinquent’ on Taxes

The law signed in 2006 by former President George W. Bush
was a response to concerns about tax evasion among contractors.
While Reid said the Senate could vote on repeal this week, he
said he wants to ensure that contractors who aren’t current on
their taxes don’t benefit.

“We should amend it to make sure that those people who are
not delinquent in their taxes, they get the benefit of what
we’re trying to do,” Reid said. “Those that are not, don’t.
Those that are delinquent on their taxes, you’d still withhold
the money from them.”

The Obama administration has said it supports the House-passed legislation and offset.

After House passage last week, business groups including
the U.S. Chamber of Commerce were poised for victory in their
fight against the withholding rule. Their win, if it happens,
could now be postponed. If the Senate passes the legislation
with the changes Reid proposed today, it would have to go back
to the Republican-controlled House for another vote.

“The House overwhelmingly passed this bill last week and
it is endorsed by President Obama,” said Blair Latoff, a
spokesman for the U.S. Chamber in an e-mail. “The Senate needs
to pass the bill as is and stop playing politics with the issue.
Failure to do so will have a dramatic, negative impact on honest
tax-paying businesses across the United States, hurting their
ability to create jobs.”

Complicated to Determine

Federal, state and local governments could have trouble
determining whether a contractor is delinquent in paying taxes
and should be subject to the withholding, as Reid envisions.

Senate lawmakers are still deciding how to offset the cost
of the repeal, which would result in $11 billion in forgone
revenue to the Treasury over a decade, according to the
congressional Joint Committee on Taxation.

The House-passed measure offset the cost by changing the
2010 health-care law to include the nontaxable portion of Social
Security benefits in the income definition used to calculate
eligibility for government health-care programs. It would move
some people from Medicaid into subsidized coverage in new
health-insurance exchanges and would push others out of
subsidized coverage.

Reid didn’t say whether Senate Democrats would agree to
that offset. Senate Finance Committee Chairman Max Baucus, a
Montana Democrat, said he would like to find a “better
alternative.”